Monday, October 31, 2011

California medical marijuana patients, storefront dispensaries and their landlords are marshaling forces to stave off a massive federal crackdown against them.

On Thursday, the cause’s largest advocacy organization sued the U.S. attorney general and the top federal prosecutor in Northern California. Another major challenge is being prepared.

Meanwhile, there’s a growing move by California Attorney General Kamala Harris and others to develop defensible statewide regulations for collectives, which are trapped between state and federal law.

This week, several supporters of 2010’s unsuccessful Proposition 19 to legalize marijuana for recreational use said they were drafting a 2012 ballot initiative that would impose controls on California’s loose-knit medical cannabis industry.

The moves come after California’s four U.S. attorneys on Oct. 7 announced a campaign to shutter commercial marijuana dispensaries, accusing producers and distributors of using the state’s 1996 medical marijuana law as a cover for reaping huge profits.

Of particular concern are collectives alleged to be operating too close to where children gather or those serving as fronts for drug dealing.

In San Diego, U.S. Attorney Laura Duffy mailed hundreds of letters warning dispensary operators and their landlords to shut down within 45 days or risk criminal prosecution and property seizures. Her counterparts mailed letters to several municipalities targeting their medical marijuana regulations.

In the federal lawsuit filed Thursday in San Francisco, Americans for Safe Access claims the Obama administration is attempting to subvert state and local medical marijuana laws. The advocacy group, which has 20,000 members in California, argues that the administration has “instituted a policy to dismantle the medical marijuana laws of the state of California and to coerce its municipalities to pass bans on medical marijuana dispensaries.”

While the Department of Justice is entitled to enforce federal marijuana laws, the 10th Amendment bars it from using coercive tactics to commandeer the lawmaking functions of the state, said Joe Elford, the group’s attorney.

The case is aimed at restoring the sovereign and Constitutional right of the state to establish its own public health laws based on the country’s federalist principles, Elford said.

“The short of it is, the feds can’t tell California what to do,” he said.

The 17-page lawsuit, which names Attorney General Eric Holder and U.S. Attorney Melinda Haag, seeks an injunction barring the Department of Justice from interfering with collectives that meet state and local regulations along with the return of 99 cannabis plants seized during the Oct. 13 raid of a licensed collective in Mendocino County.

Also on Thursday, the spokesman for lawyers representing dozens of collectives and their landlords across the state said the group is preparing to file a separate lawsuit in federal court. P.J. Johnston described pending action by the still-unnamed group as a “multipronged, organized effort to get into court and to send a message to the federal government that we need to stop the aggression and sit down and talk reasonably about these issues.”

In announcing the crackdown, Duffy referred to the state’s marijuana trade as a pervasive, for-profit industry that violates federal law and has little to do with providing medical relief to the sick. The effort was sparked in part because of the proliferation of marijuana cultivation and retail storefronts across the state, Duffy said in a recent interview.

Federal prosecutors said local governments are prevented from allowing the use of marijuana, including enacting local zoning regulations, and this month a state appellate court concluded the same. Other appellate court decisions in California have ruled that state medical marijuana laws are not trumped by federal law.

In San Diego, City Attorney Jan Goldsmith has pledged to close every dispensary in the city because zoning laws do not permit them. About 20 to 25 collectives have closed and another 20 to 25 are preparing to, said Eugene Davidovich, local chapter coordinator for Americans for Safe Access. Meanwhile, 12 more dispensaries have opened, he said.

Many, including Higher Healing Patient Association on Mission Gorge Road, closed after receiving federal letters, city notices of violation, or both. John Murphy, the attorney for Higher Healing, said his clients operate as nonprofits, obeying all state laws and guidelines.

Greg Shultz, the owner of GSC Wellness on Palm Avenue, said he received a notice of violation from the city with a “huge laundry list of code compliance violations that were completely asinine.” His landlord also received a federal letter. Still, they plan to stick it out.

“I am not going to be pushed around. I come from a large family of law enforcement and I am not a cartel person,” Shultz said. “We have many, many, many cancer patients that come here and they get their medication for free. It’s really kind of a travesty.”

Approved as a ballot measure in 1996, Proposition 215 allows people with a doctor’s approval to use marijuana and receive it from their caregivers. However, it did not expressly allow or regulate dispensaries. State legislation in 2003 and guidelines from then-Attorney General Jerry Brown in 2009 authorized distribution by nonprofit collectives, but much of it was not delineated in law.

“While there are definite ambiguities in state law that must be resolved either by the state legislature or the courts,” Harris said last week in a highly anticipated statement, “an overly broad federal enforcement campaign will make it more difficult for legitimate patients to access physician-recommended medicine in California.”

Assemblyman Tom Ammiano, D-San Francisco, said he was willing to explore legislation that defines legal distribution, but warned that forging ahead would be difficult given the lack of direction from the federal government.

Tuesday, October 11, 2011

Like many confused red blooded Americans, I thoroughly enjoyed watching historical documentarian Ken Burns' recentProhibitionseries, on PBS. But I was rather disappointed by its abrupt end. Burns took the easy way out and didn't point out that right around the same time the legal federal prohibition on alcohol ended, the prohibition of marijuana was ramping up in a big way. And, while the alcohol-targeted Prohibition ended, this prohibition remains. In, fact, it is getting worse, as the Obama administration is continuing a crackdown on medical marijuana and anyone who is approaching the problem in any sort of sane or rational manner -- including local and state government officials.

The most enjoyable thing about watching a Burns series is learning historical information on the history of marijuana that you weren't previously aware of, while being entertained at the same time. This combination of education and entertainment is a tough sell to America, and Burns never seems to disappoint. For instance, I learned that all during Prohibition, there was a medical loophole. You could go to your doctor and get a prescription for "medicinal" alcohol, and then legally buy some whiskey or brandy or whatever else you fancied. Also, there was a "home brew" exception for making your own wine at home. The other interesting things were the details on the lengths which both the federal law enforcers and the bootleggers themselves were willing to go through in their years-long game of cat and mouse.

Fast-forward to today. The Obama administration came into office promising a "science-based" drug policy. Within months, the Justice Department put out a memo which seemed to interject some common sense into the war on marijuana. The feds (said this memo, now known as "the Ogden Memo") wouldn't waste a whole lot of time or money going after people who were following their state's laws when it came to the subject of "medicinal marijuana" (or "medical marijuana").

This, while signifying a big step in the right direction, fell far short of a "science-based drug policy." Or even, for that matter, a "fact-based drug policy." As of this writing, 16 states and the District of Columbia have legalized (in some form or another) medicinal marijuana. That is 17 out of a possible 51 jurisdictions -- precisely one-third of the country, to put it another way. One-third of our governments have decided that sick people are allowed to use marijuana. In other words, that marijuana has a valid medical use. If Attorney GeneralEric Holderwere following any sort of science-based (or even fact-based) drug policy, he would admit this reality. He refuses to, in a fundamental way that (if addressed) could solve the entire federal/state legal problem.

Marijuana is what is known as a "Schedule I dangerous controlled substance." Drugs are classified as to how harmful they are, both medically and socially, on this scale. I've written about this before, inan articlewritten when the Ogden memo was made public:

Schedule I -- which includes marijuana -- differs from Schedule II in only one regard. From the Schedule I language: "The drug or other substance has no currently accepted medical use in treatment in the United States." Schedule II drugs are just as illegal as Schedule I, but have "a currently accepted medical use with severe restrictions." Schedule II drugs include: cocaine, opium, amphetamine, methamphetamine, PCP, and secobarbital. Possessing any of these without a prescription will get you locked up, but the possibility for a doctor to prescribe them exists within the law. Marijuana is not included in this list.

Wednesday, October 5, 2011

In a potentially crushing blow to the burgeoning medical marijuana industry, the IRS has ruled that MMJ dispensaries cannot deduct standard business expenses such as payroll, security or rent.

Harborside Health Center, one of the nation's largest medical marijuana dispensaries and considered a model for the industry, is on the hook for $2.5 million in taxes from 2007 and 2008. That is $2 million more than the Oakland, Calif.-based company paid for those tax years.

“I see only two outcomes here,” said Steve DeAngelo, director and chief executive of Harborside. “Either this IRS assessment has to change or we go out of business. There really isn’t a middle ground for us.”

DeAngelo says the ruling will likely be appealed. He has 90 days to respond to the ruling.

The IRS ruling is based on an obscure portion of the tax code -- section 280E -- passed into law by Congress in 1982, at the height of Reagan administration’s “war on drugs.” The law, originally targeted at drug kingpins and cartels, bans any tax deductions related to "trafficking in controlled substances."

The Internal Revenue Service refused to comment on the specific case, but letters sent from Andrew Keyso, IRS deputy associate chief counsel, to some members of Congress spell out the official position:

“Section 280E of the Code disallows deductions incurred in the trade or business of trafficking in controlled substances that federal law or the law of any state in which the taxpayer conducts the business prohibits. For this purpose, the term “controlled substances” has the meaning provided in the Controlled Substances Act. Marijuana falls within the Controlled Substances Act.”

The news has spread rapidly through the cannabis community and is likely to have a chilling effect on businesses.

“We are all a bit nervous and frustrated,” said Ken Estes, owner of Patient To Patient Group Collective in San Jose, Calif. “We have tried to comply with every city, state and federal law. We ask for input from all the agencies. But we are still being punished for operating a legitimate business.”

Harborside, which celebrated its fifth anniversary Monday, serves 94,000 patients with 84 full-time employees and brings in about $22 million in annual revenue. According to DeAngelo, the center, set up as a not-for-profit business, pays about $1.1 million in taxes to the city of Oakland, $2 million to the state of California and $500,000 to the federal government.

“We have no complaint about the taxes we pay," DeAngelo said. "We are doing our part. All we ask is that we be treated like any other business enterprise. To treat us like criminals makes is simply wrong. Drug kingpins and cartels don’t file taxes. We do. But no business, including ours, can survive if it is taxed on its gross revenue. The IRS is trying to tax us out of existence.”

Keith Stroup, legal counsel and founder of NORML, the nation’s largest marijuana advocacy group, says the IRS ruling is likely to stifle the quasi-legal industry and force people back onto the black market.

“You know, Al Capone was taken down by the IRS, not by the FBI or the police. And I can assure you that Steve DeAngelo is no Al Capone,” Stroup said.

Stroup believes the move also could make it more difficult for the medical marijuana industry to capture significant capital investment. Medical marijuana is now a $1.7 billion market, according to a report released this year by See Change Strategy, an independent financial analysis firm that specializes in new and unique markets. The figure represents estimated sales of marijuana through dispensaries in states with medical marijuana laws.

Although the IRS declined comment, Stoup says NORML has received e-mails from other dispensaries that are currently being audited and will likely receive similar rulings. “Harborside is one of the biggest, so that is why the IRS targeted them first,” Stroup said. “But there are other dispensaries that will suffer the same fate unless Congress acts.”

Some members of Congress have taken up the cause.Reps. Pete Stark, D-Calif., Barney Frank, D-Mass., and Jared Polis, D-Colo., have introduced legislation to ensure the medical marijuana industry is treated like any other business.

Two Republican presidential candidates — Ron Paul and Gary Johnson — also support the legislation.

Stark’s bill, the Small Business Tax Equity Act, authorizes medical marijuana dispensaries to take the full range of business expense deductions.

“You’d think that a time of record budget deficits that the IRS would be happy that a legal business is doing the right thing and paying its taxes," Polis said. "Instead, the IRS seems intent on destroying a successful and legal business that creates jobs and strengthens our economy."

The confused legal situation is “an un-American loop of nonsense,” says Jerome Handley, a tax attorney in Oakland who has more than 100 clients in the medical marijuana industry. “My advice to my clients is simple: Document everything … and stay out of the spotlight.”

William Panzer, an Oakland tax attorney who helped author California’s medical marijuana law, Proposition 215, also successfully fought the IRS in a similar case in 2007.

In that case, U.S. Tax Court Judge David Laro declared that Californians Helping to Alleviate Medical Problems (CHAMP), a medical marijuana provider, could deduct the majority of employee costs as caregiving expenses. The IRS sought $426,000 in back taxes and penalties, but CHAMP ended up paying a tax assessment of less than $5,000.

“This law is not about protecting citizens from criminals. It is a concerted effort by the federal government to crack down on a legitimate business,” Panzer said.

DeAngelo points out the apparent craziness of the law. “The IRS allows me to deduct my cost of purchasing cannabis, which is the controlled substance they say is illegal. But I can’t deduct my payroll or my rent? That, clearly, defies logic and common sense.

Monday, October 3, 2011

In 1978, the federal government was forced to allow some patients access to medical marijuana after a “medical necessity” defense was recognized in court, creating the Investigational New Drug (IND) compassionate access program.

Since 1996, fifteen states have enacted laws that allow the cultivation of medical marijuana and protect patients who possess medical marijuana (with their doctors’ recommendations or certifications) from criminal penalties: Alaska, Arizona, California, Colorado, Hawaii, Maine, Michigan, Montana, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, and Washington. Ten of the thirteen did so through the initiative process. Hawaii’s law was enacted by the legislature and signed by the governor in 2000; Vermont’s was enacted by the legislature and passed into law without the governor’s signature in 2004; Rhode Island’s was passed into law over the governor’s veto in 2006; New Mexico’s legislation was signed into law by Governor Bill Richardson in 2007; and on January 18, 2010, Governor Jon Corzine signed New Jersey’s bill into law. In mid-December 2009, the United States Senate passed an omnibus appropriations bill that removed restrictions on the implementation of a marijuana initiative passed by District of Columbia voters in 1998; President Obama subsequently signed this bill into law on December 13, 2009.Article about states have medical marijuana legalized.

Public Support for Medical Marijuana LegalizationMedical marijuana is one of the most widely supported issues in drug policy reform.According to a 1999 Gallup poll, 73% of Americans are in favor of “making marijuana legally available for doctors to prescribe in order to reduce pain and suffering.”Assuming that those who use cannabis daily are medical users, the application of these percentages to comparable 2010 U.S. Census categories for those age 18 to 55 would calculate estimated 5 million medical marijuana patients in the U.S.

“According to asurveyof 400 physicians, both general practitioners and specialists in the Netherlands, which was performed just before the legal introduction of medicinal cannabis, only 6% said that they were under no condition willing to prescribe medicinal cannabis, while 60% to 70% regarded medicinal cannabis sufficiently socially accepted and would prescribe it if asked for by a patient.”

Medical Marijuana and health

According to the recent experiment on influence of cannabis, marijuana proved to be effective as a therapy for nausea (93%) and vomiting (75%), and as an appetite stimulant (95%).These results were also shown by many other medical researches, such as The Institute of Medicine’s 1999 report that stated “The accumulated data indicate a potential therapeutic value for cannabinoid drugs, particularly for symptoms such as pain relief, control of nausea and vomiting, and appetite stimulation.”Cannabinoids likely have a natural role in pain modulation, control of movement, and memory.

Arguments about marijuana being the gateway drug

The Institute of Medicine’s 1999 report explained that marijuana has been mistaken for a gateway drug in the past because “Patterns in progression of drug use from adolescence to adulthood are strikingly regular. Because it is the most widely used illicit drug, marijuana is predictably the first illicit drug most people encounter. Not surprisingly, most users of other illicit drugs have used marijuana first. In fact, most drug users begin with alcohol and nicotine before marijuana, usually before they are of legal age.”

Saturday, October 1, 2011

State-run medical marijuana dispensaries will not be coming to Rhode Island after Governor Lincoln Chafee scrapped the plan for fear it was illegal under federal law.

Chafee, who had earlier vowed support for the measure, said he decided the state's planned dispensaries could violate superseding federal law and become a target of federal law enforcement efforts.

"Federal injunctions, seizures, forfeitures, arrests and prosecutions will only hurt the patients and caregivers that our law was designed to protect," the governor said in the statement late Thursday.

Before his reversal, Chafee had hoped to implement a 2009 law passed by Rhode Island's General Assembly allowing marijuana distribution through three state-run, so-called "compassion centers."

Currently, 16 states and the District of Columbia allow for medical marijuana use.

One of them is Montana, where in March federal agents raided state-sanctioned medical marijuana greenhouses and dispensaries in several cities, prompting an outcry from legalized pot suppliers. The busts, the first since Montana legalized marijuana for medical purposes in 2004, appeared to mark a reversal of federal policy set in 2009 that tolerated state-approved dispensaries.

Threatening a similar crackdown in Rhode Island, both the U.S. Department of Justice and Rhode Island's U.S. Attorney, Peter Neronha, this year said commercial operations such as the state-run dispensaries would be potential targets of "vigorous" criminal and civil enforcement efforts by the federal government.

Dropping the dispensary plan means that patients in Rhode Island will have to continue to grow their own marijuana, buy the drug illegally from "street" dealers, or acquire it from over 2,500 licensed caregivers in the state. Many have said they would prefer to use dispensaries for a convenient, safe, regulated option for quality marijuana.

Keith Stroup, legal counsel with the National Organization for the Reform of Marijuana Laws, or NORML, a Washington, D.C.-based marijuana smoker's lobby, said his group was disappointed with Chafee's action.

"He's using the threat of federal enforcement somehow coming into the state as a justification to refuse to implement the medical marijuana dispensary provisions that previously have been approved," he said.

But long-time opponents including state Representative Doreen Costa cheered the plan's demise.

"I am very happy that he did that," said Costa, a Republican, who said some of her constituents did not want a dispensary in their district.

"Mainly the concern was, in the state of Rhode Island, marijuana is illegal, period. So if he wanted to open up the compassion centers, people would go buy the marijuana and I know they would be selling it on the street," Costa said.